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There will be six barbers, each working ten hours per day. They will be able to do 2 haircuts per hour, with an average charge above the median at £35 per cut. They will be at capacity during the two-week run of the Olympics and at 75% capacity during the week before the Games. Revenues during set up and take down will be non-existent. The barbers will make £15 per cut, so roughly £30 per hour. The manager's salary will be £500 per week, with rent being a further £400 per week. All of the equipment will be rented, but this needs to be paid up-front.
Cash Flow Statement
1
2
3
4
5
6
Set-Up Costs
-2000
-1000
0
0
0
0
Rent
-400
-400
-400
-400
-400
-400
Supplies
0
-1500
-1500
-1500
-500
0
Salaries
-500
-500
-5225
-6800
-6800
-500
Revenue
0
0
11025
14700
14700
0
Take-down Costs
0
0
0
0
0
-1000
Cash Flow
-2900
-3400
-1900
Total
In total, the venture will need the first three weeks' worth of costs, aside from the barber's salaries. This total will be £8700, which is the amount that we will need to borrow from the bank. This amount will be paid back at the end of the Olympics.
The primary cost categories are the set-up costs, the operating costs and the take-down costs. The equipment will be leased and this cost must be paid at the outset, during the set up phase. Most of the set-up will be undertaken by the owner and the manager, and will consist of the installation of equipment, and the licensing of the business. Supplies will be purchased in advance of usage. The barbers will be paid on a per-cut basis, so their pay will not be covered in advance. If they work overtime, the shop should be able to generate additional revenues. It is not expected that there will be...
For the three weeks when revenues are generated, the shop will be able to finance all of its operations. Marketing costs are going to be generated mainly through publicity -- social media and conventional media in particular. There is a plan in place to make these hairstyles one of the trends of the Games, and our shop being the specialist. This will hopefully involve some high profile athletes, although they will not be signed as endorsers as this would erode our profit margins.
This line of credit will be used to lease chairs and mirrors, and to purchase basic equipment such as clippers and shavers. A sound system will be donated by one of the principles as will televisions to show the Games, creating a celebratory atmosphere at relatively low cost. The project is expected to generate a profit of £8700, which indicates a 200% return on investment. The first 100% will go to repaying the line of credit while the owner will retain the rest as profit. Because the shop is only scheduled to run ten hours per day, there is room for expansion to accommodate longer hours and increase revenues further, should demand necessitate this and the barbers agree to do so. As such, we feel that the cash flow projections are relatively conservative, and expect that the line of credit can be repaid easily, with interest.
Appendix a: Survey
1. Have you ever purchased a custom design haircut (words, designs, images)?
2. If yes, how often have you done this?
3. Would you consider sporting such a design for the 2012 Olympics?
4. If yes, would you do so in support of a favourite athlete?
4a. Would you do so in support of a charity?
5. How much do you typically pay for a haircut?
6. If you have purchased a custom design haircut, how much did that cost?
7. How much would you pay for a custom design haircut for the Olympics?
8. Would you be willing to trust a different barber from your regular one with this design?
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